Behavioral Economics
https://systemsthinkingworks.wordpress.com/2012/10/03/neoclassicaleconomic-theory-vs-behavioral-economics/
http://evonomics.com/why-neoclassical-and-behavioral-economics-doesntmake-sense-without-darwin/
http://partners.nytimes.com/library/magazine/home/20010211mag-econ.html
http://www.economicsdiscussion.net/neo-classical-theory/limitations-neoclassical-theory/5-major-limitations-of-neo-classical-model-of-growth/13046
Neoclassical Economic Theory
http://theconversation.com/why-does-neoclassical-thinking-still-dominateeconomics-3861
https://www.theguardian.com/commentisfree/2013/oct/28/economicsstudents-neoclassical-theory
http://law.jrank.org/pages/1047/Economic-Crime-Theory-Advantagesneoclassical-approach.html
http://www.economist.com/economics-a-to-z/n
http://www1.aucegypt.edu/faculty/thompson/herbtea/articles/jie2.html
https://www.boundless.com/economics/textbooks/boundless-economicstextbook/principles-of-economics-1/economic-models-43/assumptions-15812256/
Conventional, Mainstream or Standard
Economics
Conventional Economics, Mainstream or Standard Economic Model is defined as
the principle of an individual who tries to maximize a utility function, in which
utility is a function of the quantity of goods and services consumed by that
individual (McDonald, 2008). It provides explanations of behavior and is based on
the fact that people's own consumption is very important for them.
The standard or also called neoclassical economic analysis assumes that
humans are rational and behave in a way to maximize their individual self-interest
(Dawnay and Shah, 2005). As this rational assumptions leads to powerful
analysis it also has its shortcomings which can end up in an unrealistic analysis
or policy-making. Therefore it is important to include behavioral concepts which
will be discussed in the next sessions.
Behavioral Economics
Behavioral Economics (BE) increases the explanatory power of economics by
providing it with more realistic psychological foundations (Camerer, 2002).
According to Mullainathan and Thaler (2000) it is a combination of psychology
and economics that investigates what happens in markets in which some of the
agents display human limitations and complications. As can be seen from both
given definitions behavioral economics is concerned about the human aspect in
decision making as well as economic issues which are relevant.
What Behavioral Economics tries to do
Predictions and useful theoretical frameworks which can be applied by
economists can be used in different kinds of economic or even non-economic
behaviors which the neoclassical approach describes. The main target of BE is
persuasion which increases the fortification of economic analysis improving
theoretical insights, indicating better policies and providing appropriate
predictions of field phenomena (Camerer and Loewenstein, 2002).
Methods of Behavioral Economics
Generally the methods used in BE are similar or even the same as in other areas
of economic. Initially experiments were used in order to distinguish certain
behaviors from standard ones due to the fact that the experimenter has enough
control.
Nowadays behavioral economists introduce other methods which are already
employed by economists. A number of new contributions and new aspects of BE
relies on field data and field experiments (Gneezy and Rustichini, 2002), brain
scans (McCabe et al., 2001) and computer simulations (Angeletos et al., 2001).
Benefits of Behavioral Economics
BE tries to involve more aspects of human behavior in order to predict outcomes
as well as to explain different kind of behaviors (Camerer, 2002). Moreover it
relies on ME analysis and thus generates theoretical insights which are valid
throughout a long time.
Therefore it can be seen from the paragraphs involving various disciplines,
concepts and approaches that some challenges might occur due to the fact that a
large number of differing ideas come into play.
Challenges of Behavioral Economics
As already discussed in previous sections it is difficult to define BE or even find
one prefect way of application. This is for the reason that different minds have
different attitudes and viewpoints. Hence there are some challenges witch results
from these facts.
According to Prelec and Levy (2006) BE is not perceived as a standalone theory,
meaning an alternative psychology theory. To a greater extend it is seen as a
rejection of the known model of "if" conditions which is concerned about the fact
that the only criteria of evaluating an economic model is the marketplace itself.
Moreover the two authors state that behavioral economists depart from the "as-if"
approach by using psychological plausibility.